SPANDEX

Spandex Israel Ltd (in liquidation) is a company that was engaged in the manufacture of spandex, using composite chemical processes. In February 2002, following the accumulation of losses of approximately NIS 300 million by the company, a temporary liquidation order was granted to the company and Zvi Yochman, CPA was appointed its temporary liquidator. Zvi Yochman, CPA was authorized by the Court to operate the company as a going concern and to realize its assets. Our firm has assisted the liquidator from the time of his appointment in all the necessary legal aspects. Within this context, our firm has accompanied the transaction for the sale of the company’s assets to Mirabu Chemical Industries Ltd. for approximately US$ 8 million.

Within the framework of this case, the company’s former CEO had filed a claim against the liquidator in the Labor Court for the payment of approximately NIS 4.5 million in respect of salary and other rights, with this being for the employment period of six months (according to the CEO’s position) and three months (according to the liquidator’s position). In his claim, the CEO alleged that the terms of his employment during the liquidation period are pursuant to the agreement that he had with the company prior to its liquidation. In contrast to this, the liquidator alleged that the agreement that the CEO had with the company prior to the liquidation is not relevant and that the liquidator is a new employer. Additionally, the liquidator has alleged that the terms of employment demanded by the CEO are unreasonable and totally out of line with any reasonable measure, bearing in mind that the company is insolvent. The CEO has alleged that his dismissal by the liquidator was not done in good faith and is therefore invalid.

On September 9, 2007, an innovative, precedent-establishing decision was handed down by the President of the Nazareth Labor Court, pursuant to which the position of the liquidator was accepted, whereby a liquidator that employs the employees of the company is a new employer and there is no automatic application of the employment agreement that a particular employer had prior to the liquidation. It was also decided that the dismissal of the CEO by the liquidator is valid and was not carried out in bad faith. Pursuant to the decision, the liquidator was ordered to pay a total of approximately NIS 3,700 (from the claim of approximately NIS 4.5 million), while the CEO has been ordered to pay costs to the liquidator amounting to NIS 15,000, in light of the fact that the liquidator had claimed millions, but was only awarded the aforementioned inconsequential sum.